All Things Shipping
Apr 6, 2023

Warehouse Management System (WMS): What They Are and When to Use Them

If using a warehouse management system (WMS) isn’t part of your business strategy, it’s time to consider implementing it. A high-quality WMS can help you streamline processes, reduce errors, and even provide a more positive customer experience.

If you’re wondering what a WMS can do for you, you’re not alone. Given the rise in popularity of e-commerce, warehouse managers have many different online merchants moving products through their warehouses daily. And large-scale retailers who own their own warehouses need a way to keep track of inventory as it moves through their supply chain.

You should know that a WMS can take your business to the next level.

Keep reading to learn what warehouse management software is, why it’s so valuable, and what you should consider when selecting the right one for you.

What Is a Warehouse Management System?

A warehouse management system is software that helps warehouse managers and employees facilitate operations like picking, packing, and shipping. This software is designed to streamline warehouse processes to save companies time and money while optimizing day-to-day operations simultaneously.

What Does a WMS Do and How Does It Work?

The purpose of a WMS is to provide real-time visibility into an organization’s inventory. It enables warehouse personnel to quickly and efficiently track, pick, receive, and ship orders with intuitive tools that help to streamline processes.

Warehouse management software monitors products through every stage of the fulfillment process. The software works with barcode readers and radio frequency identification (RFID) tags to update the inventory management data in the enterprise resource planning (ERP) system in place at the warehouse.

The process is simple; each product has a unique barcode or RFID tag that identifies it in an organization’s ERP system. When a new product arrives, warehouse personnel use scanners to register the barcode or RFID tag into the ERP system, which updates the inventory log. These identifiers can also be used to sort products into locations, which makes it easy for pickers to locate items on the warehouse floor.

Warehouses can be huge, so limiting the time it takes to locate certain items can boost productivity and increase satisfaction from the e-commerce merchants using your facility to hold their products.

The warehouse management system also updates inventory levels when stock is pulled for new orders. Pickers use it to quickly locate an item, pull it, and scan it into the next stage of fulfillment, which removes the product from inventory. When the order is shipped, carrier and tracking information is entered into the WMS, which makes it easy to follow an order to delivery.

Where Does a WMS Fit in Your Supply Chain?

A warehouse management system sits at the core of your supply chain. This is because all goods, from raw materials to finished products, are recorded there.

WMS plays a vital role in warehouse efficiency since supply chains depend on efficient warehouses to move smoothly. By utilizing this software, management teams can better organize warehouses, creating a customized workflow tailored to business needs.

Warehouse management software is also often used in tandem with other important tools, like ERP, inventory management, and TMS software which are often used by large-scale retailers. By integrating these operations with WMS, companies can craft fully-automated warehousing, shipping, and invoicing processes that can eliminate errors and, in turn, create more profit.

Types of Warehouse Management Systems

Warehouse management systems are not one-size-fits-all. There are several types of WMS options to choose from, and the right option for you will depend on your unique business needs.

Let’s take a closer look at the types of WMS out there and what the pros and cons of each are:


Aimed for large-scale retailers who own their own warehouses, an integrated WMS is software that is offered as an add-on to the software you already have, such as an ERP. Since this type of WMS is designed to work seamlessly with existing software, it makes it easy to transition to using WMS. It also makes comparing inventory and financial analytics easier since all the data is stored in one place.

Integrated WMS isn’t for everyone, though. These add-on options often offer fewer features when compared to other types of warehouse management systems and aren’t easily customizable.


If you’re looking for WMS that can easily be tailored to your exact business needs, a standalone WMS is the way to go. This type of software packs a serious punch in the features department and is designed to be molded to fit your unique needs.

On the other hand, standalone warehouse management software is built to emphasize warehouse operations, which means you’ll have limited functionality in things like inventory and invoicing.


As its name suggests, on-premises WMS involves a network of hardware and software that you house on-site. This type of software is ideal for businesses that want to have complete control in areas such as security and personalization.

It’s important to note that on-premises WMS is not usually a good fit for large operations. Managing things like updates and maintenance on a large scale can be more trouble than it’s worth.


Cloud-based warehouse management systems are among the most popular, and for a good reason. Using cloud-based software means you won’t be responsible for things like maintenance and updates. It also has some of the lowest startup costs since they don’t require hardware or IT installation.

However, cloud-based systems are not as easily customizable, which makes them ill-fit for many large organizations. Additionally, even though startup costs are low, licensing fees can make this option more expensive over time.

Benefits of Using a Warehouse Management System

By using warehouse management systems, organizations can effectively minimize backorders, use time more effectively, and save money. It can also help management teams organize inventory to optimize warehouse operations for efficiency and accuracy.

The best part is that there are many other benefits to using a WMS:

  • Reduce labor costs: A well-organized warehouse with the tools needed to operate efficiently saves time and money.
  • Improve inventory accuracy: Using a WMS to track inventory is one of the easiest ways to make sure your inventory data is accurate. 
  •  Improve flexibility and responsiveness: The visibility that warehouse management systems provide offer flexibility and make it easy to access vital information, which aids in responsiveness.
  • Decrease errors in picking and shipping: Errors in picking and shipping are a major pain point for many e-commerce businesses. The right WMS software can help you create processes that focus on reducing these errors.
  • Improve customer service: Good warehouse management software makes it easy to get order information, process returns, and ship replacement orders, which is a cornerstone of excellent customer service.

Best Warehouse Management Software for E-commerce Business

Choosing the best warehouse management software for your e-commerce business can seem like a daunting task. Luckily, choosing the right one for you will likely be easier than you think.

You’ll need to consider what you’re looking for in a WMS. For example, if you’re looking for customization ability, on-premises or standalone software would be the best fit.

Cloud-based WMS options like ShipHero allow you to handle inventory, receiving, picking, packing, and shipping with cutting-edge software that makes these processes a breeze. You can even integrate ShipHero with third-party apps, like Shopify Plus and Loop Returns, to maximize efficiency and create a positive experience that converts first-time buyers to loyal customers.

Undoubtedly, there’s much to consider when implementing WMS into your business strategy. You’ll need to spend time, money, and resources getting set up, which can be taxing. However, the result is well worth it.

For more help choosing the right warehouse management system, contact your Shippo customer success manager.

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Sarah Gage
is a Michigan-based freelance writer covering business, marketing, and technology topics. She is also the owner of Content Conquered, a B2B-focused content marketing consultancy.

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